The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

Economic reform wider than audit: report

Tighter federal and state budgets are going to make economic reform harder in the future, a report says.

Business consultant Rod Glover was hired this year, before the election of the Abbott government, to review the COAG Reform Council and look at challenges ahead for federal-state relations and the economy.

The COAG Reform Council is the body set up to monitor the progress of agreements made by Prime Minister Tony Abbott and state and territory leaders.

Mr Glover's report, released this week by the Department of the Prime Minister and Cabinet under freedom of information, finds that the past practice of reward payments to the states, or "buying reform" - such as occurred with the introduction of the GST and national competition policy - might not be available in the future.

He says this is particularly true as governments look to commissions of audit to tighten the purse-strings.

"While a national commission of audit may identify savings and set medium-term parameters, it is unlikely to get to the heart of the challenge," Mr Glover says in the report.

"While austerity can drive innovation, such audits typically see innovation only as an afterthought."

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He adds that while some extra spending could leverage reform, the link between more public spending and getting the best outcome is "typically weak".

The report's release comes as Mr Abbott set December 13 as the date of his first COAG meeting and COAG Reform Council chairman John Brumby is due to address the National Press Club in Canberra on Wednesday.

The consultant writes that the coalition has indicated it wants to play a "smaller role" in public transport, health, education, the environment and industry policy.

But he says the proposed white paper on federalism would be a key task in dealing with waste, duplication and shared responsibilities.

The report says that rather than look at Australia as a national economy, it should be considered in policy terms as three "regional economies": the resource economy (Western Australia, Queensland and the Northern Territory); the knowledge/services economy (Sydney, Melbourne and Canberra); and the production economy (South Australia, Victoria and Tasmania).

Mr Glover suggests the COAG Reform Council changes tack and offers expert advice on policies as they are being developed, rather than waiting until after they are rolled out.

The council should also be a stronger public advocate for improvements to Australia's federal system, he says.